social security, we know what they are. it does not require any more study. tax reform cannot be done between now and the end of the year. i believe we have a bipartisan view that after 25 years, it is time for tax reform again but that will take a while. is going to take a while. what the president is trying to achieve on the top, two tax rates, he can get by doing nothing. the law is certainly stacked in his favor. the point we have all made repeatedly is that you cannot solve this problem. we now have a debt the size of our economy. you cannot solve america's problems. you cannot leave the kind of country behind for our children and grandchildren that our parents left behind for us until you make the entitlement programs meet the demographics

of our country. we have known that for years. when are we ever going to make those kind of decisions? we will have another opportunity later, when the debt ceiling issue arrives. when are we going to make this decision? that is our question. this whole discussion -- and admittedly, the president has some advantages, being one messenger. you would think this whole discussion was about nothing other than raising the top two has tax rates. -- two tax rates. that has literally nothing to do with solving the problem. i have been waiting for the president to become serious about solving the problem.

i do not know when he is going to become serious. it sounds to me like we are running out of time. we will take our cues from the speaker as to when they are able, if they are able, to reach some kind of agreement. >> the democrats have 50 or more votes. a great step in itself. what are the indications for republicans to approach for the debt to not be raised while spending is cut? >> , i can speak for every single republican. we think the request of any president to raise the debt ceiling in the future should involve a discussion with whoever the president is about what we might do about the debt. we should not treat it like a mother could resolution. -- motherhood resolution. we should not drop it into obamacare. the decision to raise the debt

ceiling is a perfect time to have a discussion about the debt. we will have that discussion later, at whatever point the administration decides they need to have that authority. i do not think there is going to be any sentiment whatsoever toward giving the president perpetual authority without congressional approval. i do not care whether senate democrats are for the or not. i would hate to have to defend that in the campaign. that is not going to happen. we are going to insist that we have another discussion about the future of our country, in connection with his request of us to raise the debt ceiling. i am going to take one more. >> the majority leader ahead wants to take [indiscernible]

do you support that idea? you think republicans will provide procedural help? >> lou will look at it when they present it. i heard he wants to move that soon. when he does, we will take a look at it. thanks. >> senate majority leader harry reid spoke to reporters after his party caucus meeting. he said reaching a deal on the so-called fiscal cliff before christmas will be difficult, as house republicans have not offered any detailed proposals. his remarks are just over five minutes. >> i am sorry. start over again. speaker boehner said he is waiting on president obama to outline spending cuts. this is a kind of strange thing for the speaker to say.

president obama outlined very specific cuts in his proposal to the republicans. republicans have not offered anything specific in cuts whatsoever. of course, nothing specific in revenue whatsoever. all generalizations. the republicans want more spending cuts. tell us what you want. that is what i say to them. we cannot read their minds. we are not going to make a proposal for them. republicans know perfectly well that democrats are willing to make tough choices on these issues, if they understand, which i hoped they do by now, we are going to look out for the middle class first. the only thing standing in the way of an agreement is republicans, their insistence on holding tax cuts for middle- class families hostage to bring on the fiscal cliff. there is a lot of bluster coming from republicans, but that is crumbling quickly. every day, we read about more

republicans breaking ranks, calling out the speaker to allow tax rates to rise on the wealthiest. yesterday, it was parker and coburn. today, florida governor haley barbour. he said, "i would take raising rates on the top brackets if, in return, we had tax return." he wants the rates to go up on the top two brackets. as soon as republicans accept reality, middle-class families taxes will not go up. i am confident an agreement can be reached. >> [indiscernible] placeholders and cloture motions? some republicans are saying this is restricting the amendment process, and part of the reason they are threatening to filibuster. why have you chosen to pursues those -- pursue those practices?

>> i have explained before, but let me give an example. we have to spend 8 to 10 senate days, a couple of weeks, to get on a bill, because they virtually oppose every time we try to get a bill. that with 10 days. with that 10 days, if we did not have to do that, there could be amendments. we arrive at a point where we do not have time to do that, when you do that hundreds of times each congress. we have done it hundreds of times in the last six years. they are crying wolf. it has simply no basis in fact. >> why are some of the big ticket fiscal cliff "related" items. what do you need to get done before leaving? >> we need to do the

supplemental $60.4 billion. we need to do fisa, our intelligence gathering apparatus. we need to do the defense authorization bill. we have to do something on spending. i hope the republicans move, so we can get that done. we are going to work on this community banking thing. that covers most everything. i may have missed a thing or two, but that is generally. christmas is two weeks from today. >> [indiscernible] >> i am sorry. what is that? >> the republican support on the -- >> they said what? >> [indiscernible] >> you know, this is -- everyone, listen to this. we suddenly have republican votes on internet poker. two weeks before christmas, without being vulgar, what the

hell? that was too vulgar. >> for people watching this common [indiscernible] in the time we have left, in terms of getting something done? >> we can do things very quickly. but this is not something we can do easily, at least as far as bill-drafting goes. until we hear something from the republicans, there is nothing to draft. we can get things done quickly. i think it is going to be extremely difficult to get it done before christmas, but it could be done. there are things we have to do before the end of the year. i have outlined some of them just now. yes, we can get it done, but this has been a big stall by the republicans. house republicans who have -- i assume the republicans here are

working with them in the senate. they cannot decide what they are going to do. we have heard about the infighting going on with the house leadership. i do not know how valid is. i got a message that there is a battle going on between mccarthy and ryan. the majority leader in the house -- thanks. and fainter. -- and john boehner. that is the problem. john boehner is having trouble finding help from his leadership. but the american people are suffering. i repeat -- i am sorry -- what clara mccaskill said. the speaker has to make an important decision whether he is going to save his speakership or the country. >> how about the president's

fiscal cliff plan? why hasn't that been put up for a vote yet in the senate? are you planning on putting it up for a vote? the white house proposal they floated around last week, on capitol hill. where you put it up for a vote? >> i have no idea what you are talking about. >> the white house plan, the treasury secretary. >> i have no idea what that is. >> the plan that includes revenue. >> what kind of revenue? >> the top 2%. >> what else? >> of the debt limit authority as well. and 1.6 trillion dollars was the total. in the stimulus, he to hundred billion dollars. and later mcconnell offered to support a vote for it in the senate. >> i have to be careful what he offers. the last one he offered, he filibustered his own bill.

>> [indiscernible] good will with republicans? [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012] >> coming up on c-span, the incoming and outgoing chairman of the republican study committee to discuss what they want to see in a tax and budget deal. then, the former comptroller general and former cbo director discuss the fiscal negotiations. leiter, a discussion on the potential impact of the fiscal cliff on state budgets. >> wednesday on, "washington journal," ongoing negotiations on the so-called fiscal cliff. then, we hear from the associated press on how

congressional leaders plan to handle social security as part of the talks. later, more on the role of social security ahead with the aarp and the heritage foundation. "washington journal" is live every day at 7:00 a.m. eastern. >> the white house was very controversial, as most things in america were. the man who designed washington city -- there was competition. he submitted a design for a palace. americans were not having a palace. it was not particularly odd inspiring. in fact, in 1821, a european diplomat told the congress it was neither large nor on inspiring. -- awe-inspiring. the congressman answered, the building served its purpose. if it were larger and more elegant, perhaps some president would be inclined to become its

permanent resident. >> a former new york times book critic has gathered a few of her favorite white house photos. what sunday evening, at 7:30 eastern and pacific, on american history tv. >> the american enterprise institute heard from the incoming and outgoing chairman of the republican study committee today. they talked about what they would like to see in a tax and budget deal, and what is ahead for house republicans in the next congress. this is 50 minutes. >> i am delighted to welcome you to a presentation by the outgoing and incoming chairman of the republican study committee of the u.s. congress. we are privileged to host this event, to welcome the incoming chairman, and to thank the outgoing chairman, for their

service. this is a special friendship between aei and the irs see that we have cultivated, which has been very rewarding for us. it is very unusual to have an event like this, with the outgoing and incoming leaders, for any organization. but the nature of these leaders makes it more likely than what we would see with most other organizations. the republican study committee -- this is language from the charter. i will read it, because i think it speaks volumes about what they are trying to achieve. the committee was founded to serve as an ideological rallying point, where conservatives can stand on the basis of principle, were

committed men and women without formal leadership positions can affect a change on their first state in congress, a coming up with a sound policy idea and by articulating a powerful position. it is a friendship we have cultivated for years, especially with executive director paul keller, a great friend to scholars here and and intern many years ago. the current chairman of the republican study committee is jim jordan, on the right. his term ends at the end of this congress, in a few weeks. as many of you know, jim represents ohio's fourth congressional district. through his last three terms, he has served in the u.s. house, and has quickly become very influential as the republican, standing for absolute principle, principles of constitutionally limited government for a strong national defense, fighting tax hikes, and allowing families to keep more

of what they earn. simple principles, but those it behoove is a lot of us to remember. the incoming chairman is congressman steve scalise. he represents louisiana's first congressional district, and was first elected in 2008, one term before the wave election of 2010. he is known as a staunch conservatives, as is fitting. he advocates for the principles of limited government, as have all the other heads of the rsc. american greatness, limited government, and traditional family values. he is a member of the energy and commerce committee, and has established himself are still living conservative views to national energy policy, which may come up today. congratulations on a successful term, and welcome. [applause]

we have a few minutes to ask a few questions, to get some thoughts from jim and steve about how they see the issues ahead of for the past couple of years. jim and i have gotten to know each other over the past couple of years. i have enjoyed that. we have seen a lot of stuff going on. not nearly as much wheeling and dealing as you have seen in congress. i am sure you have the scars to show for it. over the past tumultuous years, what of the biggest things you think you have learned? >> thank you for having us and for the great work you and your organization do. your books have been tremendous. many rsc members have enjoyed the info. i used the second one, the road to freeman. i have to give a presentation in charge. you were quoted from the hall

but. >> have no souls were saved that sunday. >> we appreciate the close relationship we have had with your fine organization. the highlight was frankly when -- i would argue when our republican conference was most united was during the biggest fight we have had this congress, although we are in a pretty important debate right now. in the summer of 2011, we had the debt ceiling debate. as you may remember, we were the entity that put forward this concept that we viewed as a solution, not just another deal, but a solution to our debt and growth concerns. a solution we called a cut and balance. a united our conference. it was something the american people embrace. unfortunately, harry reid did not embrace it. he tabled it in the senate, and

we moved on. it got us decided that we need to cut spending, cap it as a percentage of our economy, and function under a balanced budget requirement. it would help address our fiscal concerns, but more importantly, it would help us get to economic growth. the one thing we need him -- george will spoke to a group of us. he had a great line. when you have 1% growth, it feels like a zero sum game. when you have a 5% growth, it is boundless opportunity. we have to get back to this message. what can we do to give opportunity to american families, american young people, americans in general? cut, cap, and balance was part

of that, getting back to, promoting growth, and the specialness that reagan talked about. it is where we need to be as a party and as conservatives. >> if you have a particular disappointment over the past couple of years, besides the november election, what would it be? "the fact that we did not patent that. let us be honest. the decisions we made in december 2011 put us in the mess we are in today. if we could have held strong and got a solution and to help solve our fiscal problem and promote economic growth, who would not be where we are today. and we are getting ready to raise the debt ceiling again, and we have yet to make one dime of the promised cuts in the last debt ceiling agreement. that is probably our biggest disappointment, when i look back on it. if we had gotten a better outcome in that debate and that fight, it might have had an impact on who and one in the

past election. like we tell our kids all the time, you make decisions. they have consequences. we made a decision to go along with a deal and that is a and bad policy. doing the things, conservatives and republicans stand for and been told republicans we were going to do -- the same situation, where we did not get it done, is my biggest regret. >> you are taking on a great organization. in the past 15 years, it has gone from 17 members to 170 members. extraordinary expansion because of a good leadership, and because this is the zeitgeist. what to expect to see you building on? what are your big parties? >> of want to thank you for the leadership and wisdom and you give. you have spoken to the rsc in

number of times. the more we talk about them, he and especially in those terms, we have a much but ability to bring people to our side, because i think they want to be here. we need to lay it out in a much better way. i want to commend jim jordan for a great two year term. he has the scars to prove he has spent a great chairman. he has given service to all of us. i am looking forward to see him continue. if you look at where we are, we have great challenges ahead. we know what we are facing, in terms of what this president wants to do, not only in terms of spending, but in terms of a radical policy, attacking some of the basic principles we believe in the secure the american dream. if we look at how we can achieve

the things we need to do as conservatives, the first need to recognize the barack obama has talked a lot about a mandate he had. he did not run on a very broad agenda in this last election cycle. things might be bad, but they would be worse under mitt romney and are still, the fault of bush, so do not blame me. this guy is bad, and we need to continue because things are about to get better. that was the bulk of his message. in the house, we ran on a real conservative agenda. not only a visionary agenda, but we took the hits for the votes we took. we took important votes. we passed a budget out of the house. the senate has not passed a budget in three years. we passed a budget that starts to tackle the input, go bankrupt if we do nothing. we passed reforms i would get us to a balanced budget. we have passed cap and balance. with put real cuts on the

table, real economic growth bills, jobs bills, that have a bipartisan growth. we passed a bill a few months ago that prevents the fiscal cliff by saying no taxes will be increased, a bipartisan bill. all of those votes, were criticized for. they called us right wing nuts and extremists. we explain to the people what we want to do to get our economy moving again, but also to control spending in washington. and we were reelected with a mandate not only to continue to be in charge of the house, but to be the line of defense against the radical administration. i think we know what our task is. all but, for candidates -- all

but four of the 30 candidates elected are talking about joining rsc. they were elected on these principles we believe in. i am comfortable with where we are positioned now, but i know it is going to be a tough ride ahead. we would not be doing this if it was not a mandate the people sent us to go do. >> something on all of our minds is the fiscal cliff. i would be remiss if i did not ask you both to weigh in on it in the following way. first, what is going on that we do not understand? number two, what should happen? number 3, what is the rsc going to do to help us get to that sector state, and what should happen? either of you want to chime in on that? >> first of all, if you look at where we are right now, and

because of a number of reasons, a few of them going back to the last debt ceiling bill -- i did not vote for the budget control act, and because it did not address the real problem, and that is spending. if you look at the debate, it is mostly a debate about how much in taxes to raise, and the president keeps moving the goal post. he keeps adding more to it. he has an insatiable appetite to spend money and attack other people for it. we are not talking about addressing the real problem. i do not think anybody's taxes should go up. barack obama said three years ago, if you raise taxes in a bad economy, it will make things worse. we are still in a bad economy. we ought to be focusing on the real problem, preventing texas from going up. to get people working again -- that was the biggest issue to come out of the election.

president obama is not talking about how to control spending. all he wants is an unlimited debt ceiling increase, so he can continue going forward. you are going to see rsc members continue to fight for those principles to solve these problems. >> tax increases are going to promote his growth. you should not do it the wrong policy. our conference does not have a tax reform plan. rsc when to simpler rates on the personal side. you need that inspiring -- this is going to help every single family. we do not have that message now. and we should not raise taxes, certainly. that is wrong. it does not how growth. we need a plan that inspires. everybody understands the tax code is broken.

some acute here are too lazy to raise their hand. they nod their head. any tax code that says to approximately half the population, you do not have to participate in the main tax, is broken. any tax cuts as to the american companies, we are going to charge to the highest corporate rate in the world, that is stupid. we need to fight. here is what we are for. here is what helps our family. here is how it makes a difference for you personally. this is what it will mean more opportunity for your kids, it has to connect personally with families across the country. people are saying the republican party, after this loss, needs to change. we have the right principles. we just need to present them better, the way arthur talks and writes about.

oriented toward the family. i never intended to get into politics. i was going to coach rustling forever. -- wrestling forever. iran because i care about families and opportunities. it starts with the tax code, but it has to connect in that way. steve understands that. that is what this organization is doing such great work. >> thanks for that. you mentioned something about the debt ceiling. that is an esoteric topic for a lot of americans. the president of the united states has proposed to have, at his discretion, be able to raise the debt ceiling of the united states in an unlimited way forever. without the approval of congress.

what is the big deal? >> it is practically the most frightening proposal that has come out of this town, and a lot have. when you add on the entitlements that are unfunded, the president, i do not think, has a knowledge, and maybe he does not recognize that one of the greatest threats to economic freedom and to the american dream home -- i have a five- year-old and a three-year-old. i think most people that have young kids recognize the ability to have the same opportunity we have today is at risk because of spending. they will not play a single cut on the table. he comes up with a ludicrous proposal to have unlimited increases in the debt ceiling,

so he can continue expanding as much as he wants. >> i am sure you are aware of the research of our economists have done on how to solve the fiscal crisis here. one of the things we find very clearly is that countries that try to solve fiscal crises on the basis of revenue increases through taxes tend to fail. those that succeed rely at least 85%, on average, on spending cuts. this is the empirical truth. effectively, this is the right approach. you often wonder, when you see what appears to be the endorsement of the president's policies, as ratified in the last election. here is a slut with

philosophical question. we have set a long time -- i know you have agreed with this. -- here is a philosophical question. you wanted your values to be represented. they are american values. what does it say that this election when the way it did? we were talking about how to solve our fiscal problems. whether or not our problems with those of understanding or under texting. what does it say about the american people and how our republic is changing? >> the big deal is the constitution. somehow, the president wants to forget about that and be able to spend and borrow. how it makes no sense to me. kelvins work is great stuff. it is all good work. >> our chief economist.

sorry. >> it is great work. i do not know that you can extrapolate and say -- you have to people running for office. the incumbent won and our guy lost. i wish our guy won. i thought he was going to. i thought it was going to be closer. many of you have all kinds of explanations about what happened and why it happened. there is a host of things. i do think what i said earlier. we have to make sure we are presenting what we think is best for the country in a way that connects with american families. when we do that, we win. our party is about four issues -- lower taxes, less spending, a stronger defense, and traditional values. when we have, he and that who can present that in a compelling

way, we wind. when we have members of congress who can present those things in a compelling way, and we win. i do not think anything has changed. it is always msnbc talking about how we have to behave. we will take it for what it is worth. when we stick with our principles, and present them with the right tone and the right passion, in the right way, we win. and we are in an important moment in the conservative ahead of movement. we have to be willing to do the extra work and make sure we prevail and wind. -- win. this campaign was a populist and divisive. it shows you that if populism

and division go unchecked, there are people that will buy into that argument, if they are not shown the other side of it. i think not a good enough job was done at not only defending free markets and conservative beliefs, but getting into this question of tax fairness, and the concept of sticking it to the other guy, when the other guy is behind the tree. instead, not the intention of wealth. one of the great things of our country is it encourages everybody to sacrifice everything. look at the people who drop out of harvard and are billionaire'' because of our great system. do not forget about the millions of great jobs created. it was not just about their wealth. going deeper into the question of how president obama's

decision to raise taxes -- maybe somebody can afford to pay more. if you give this president more money to spend, is he going to use it to spend even more money? most people recognize he is going to wasted on more efficient government. middle-class families are not getting those jobs. obamacare has tax increases on middle class families, which most people have not realised yet. >> the fairness point is interesting. most of us who descended from immigrants would be hard- pressed to imagine our ancestors coming to the country to get a system of forced income redistribution. the redefinition of the fairness argument is probably a key thing you guys have been talking

about, something we all need to contemplate a little bit better. something that keeps us awake at night, regarding the fiscal cliff, is what will happen in the defense sequestered. if this rolls over and there are of some of the budget cuts, and january 1, there will be relatively indiscriminate cutting across the defense budget. according to scholars, this is a very dangerous thing. can you weigh in on that? >> we have a bill i've proudly sponsored that moves those cuts to discretionary. energy and commerce was one of the committees have taxed on finding other areas to cut. we identified those things. we were attacked for wanting to cut things that people like. frankly, some of them are things people recognize we cannot afford to do.

and but we lay those cuts out there. it is a bill i stand behind today. the worst thing would be to shut off the sequester altogether. we need to have a sequestration to cut spending. all would like to see a shift of the defense cuts to other parts of the budget. >> i feel the same way. i have said the only thing worse than defense cuts are no cuts of all. we may differ a little from some of her scholarship. and i think it is important to remember a strong national defense is what our party is about. many of you probably remember at theezza rice's speech republican national convention. the world is a scary, a dangerous place, but less scary and dangerous when america leads. if you want to leave it diplomatically, you had better leave militarily. if you want to lead militarily,

you better lead economically. she captured what we need for a safer planet. america needs to lead. part of that is having a strong national defense. we should replace those cuts. we have supported that legislation. we have a member who has put together and the bills we passed this summer. one would extend all tax rates, which had 19 democrats support it. we have 19 democrats say before the election we should not raise taxes on any american. we also have the defense cuts, he sequester replacement legislation, which would replace defense cuts with cuts to other parts of the government. we have that bill ready. within that is where we need to go. >> i would give the rest of my time to the audience. here are the basic ground rules we usually imposed. if you have your hand up, he will find you. please wait for the microphone. say who you are in your

organization. and put your protest statement in the form of a question. we will start in the front. >> david grant, "christian science monitor." to get back to your point about putting conservative policies into something families understand, one thing that has been discussed in the aftermath of the election is immigration. i wonder what you have thought about, whether you have discussed it in the irs see -- in the rsc, and whether you have discussed a legalization process for people here illegally, which seems to be the main sticking point between the parties in the past. >> we have got some great members of rsc that are interested in being in this debate in the next congress. i think you will see it escalate. i will mention labrador and

goodlat specifically. labrador did this before coming to congress and understands this inside out from a conservative perspective. helping leave this debate will be critical to solving it, rather than using it as a political wedge. >> like with any -- you stick with your principles, you are going to arrive at the right policy. that is what we need to do. we need to remember that we should not just give amnesty. for people who legally come here, we want to work faster. a better process, so americans who want to experience mahatma we have experienced have that opportunity. if you have never had a chance to go to and naturalization ceremony, and they are an amazing thing. when the new citizens say the

of, and they realize that are not a citizen of the greatest country ever, that all want to get a picture with me, and i have nothing to do with it. it is amazing. it is a special moment. i have done for of these. we want to make the system work better and quicker for these folks. steve is exactly right. congressman labrador is focused on this issue. i think he will really help us. his office is next door to mind. he is a good friend. i think we are going to move forward and get something positive done. >> your hand was up next. >> dale johnson, a free-lance writer. while i agree the individual part of the tax code is probably stupid, and the corporate part is broken, or the other way around, i worry about the center part, the small business people. especially as we talk about revising the corporate tax rate, may be bringing that down to

25%. if we still have individuals paying a small business taxes at 35%, that is a killer. do we need to create a new tax credit for small businesses, 10% on small businesses? >> what we certainly need is a simpler, fairer system. we have so many thousand exempt from taxation. it is 10% to a certain level. it is 20% to another. you get rid of most deductions and credits. you have to keep the mortgage interest deduction. you keep the terrible. something old like that -- here we are. old and simple. frankly, if that top rate is low enough, maybe we do not have the big concern you just highlighted. >> you were next. >> a blogger error -- blogger

and tea party activist. i want to know why the republicans, specifically mitt romney -- nobody would listen. they would not even listen to aei. i contacted, just personally, a citizen, contact the romney campaign for several years. they would not listen. it is very frustrating that regular people who do not belong to fancy campaigns, who just regular iq is, nothing to touch yours -- >> you might be surprised. >> and whatever. i guess, with all due respect, we know how to communicate with the people on the ground. quite frankly, he republicans have to get cooler. i hate to say that.

but in a country where the number one show its two and a half man -- is "two and a half men," we need to communicate better, with better sound bites. what happens to men when they get on capitol hill? those men who were soldiers -- could they just loosen the tide? this is war. this is absolutely war. honestly, we have a functional, dishonest and president. please fight back. thank you. >> you want a tough guy, we have jim jordan, former all-american wrestler. how do we fight about? >> i have said it a couple of times. you present principles and we know work, and have worked historically. you do it with a smile. i have always loved the line, "i am a conservative, and i am not

mad about it." you do it consistently, courageously, but with a smile. when you have the truth, one of the happy about it? when you have good news, have a smile on your face, even if it involves reading from martha's book in church. >> every campaign is different, which is why you might have a congressional seat where a republican who was a staunch conservative, and yet his mitt romney may have lost. communication is critically important, how we talk about the conservative things we believe in. going to those nontraditional places -- we have colleagues that go on to telemundo and univision. not everybody does. we need more of that. >> and not lead to be done on communications. --- a lot needs to be done on

communication. all the way in the back corner. >> , republicans were remiss in their communications on the charge that wealthy people, the income over 200, is taxed at a lower rate. it is aggressively taxed. according to the cbo, that is not true. i have said this myself a couple of times on c-span. i was the mailing american crossroads. if you do not respond, obviously, 50% are going to believe it is true. mitt romney's personal situation, if he paid an effective rate of 14%, if, on average, the rate rises as income goes up, that means somebody else above 200 is compensating for that.

that is number one. my question is, for the upcoming debt negotiations, he can the republican conference insist on at least $250 billion of savings for 2013? you authorize $750 billion, if it is going to be a $1 trillion deficit. can you insist on $250 billion? >> we certainly should insist on some down payment on some fiscal sanity in the congress, in the government. i think back to my response to the first question, cut, cap, and balance. let us make a down payment on this first year, and do something politicians never do, which is reduce spending. you give us your tax money now,

in the future, he will cut spending. and we really promise. give us your money now. it never happens. raise taxes now. increase the borrowing authority. we promise to cut spending in the future. last week, it was lucy and charlie brown. we did the same thing in the last that sivan agreement. that is something we will be pushing to do in the context of this debate, but also in the context of what i hope will be a debt ceiling debate that takes place in february and march of next year. >> let me follow the question with a related one. it is one thing to stand up to the president. when we look at the way government spending, as a percentage of gdp has risen more under republicans and democrats,

how can we do with that a little bit better? >> we have done this the last three years of the republican study committee. we actually put out an alternative budget. we believe by putting out a budget that shows a path to balance in a reasonable time -- our last one balanced in 5.5 years, according to the cbo. the budget the past -- that gives us a better chance to market that. i think that is part of the vision, how this is going to help your family, your community, if we get to balance what that means for opportunity, for growth. >> it is an important point. i came here in 2008. one of the things that have frustrated me -- our state has the balance budget amendment. we have to balance our budget every year, like most states. with the republican house and

senate -- and senate, he saw spending growing dramatically. when the republicans were fired for spending too much money, the deficit was around $140 billion. today, it is over a trillion dollars. the bigger issues -- when we get to the next debt ceiling, that is going to be the big leveraged peace -- leverage piece to reform entitlements, starting with medicare. nothing is going to change, but it has to be reformed. if it sustains itself, you'll never balancer, federal budget until you make the entitlement reform. that has to be part of the discussion in the debt ceiling negotiation.

the president is going to make it out to be the only problem, and anybody who does not give him the money is irresponsible. what is irresponsible is we are spending too much money. we are going to continue doing it until we reform the big entitlements. >> we want to go right to the middle. >> the question may be for all three of you. senator demint is moving to a friendly competitor. i would interesting -- i would be interested to hear your comments on that event. >> really? >> the heritage foundation is a pioneering group. they have done important work. i am a donor to heritage, and a proud one. and these guys have done a lot of stuff over there as well, and

it has been a pioneering organization. hyping this is the kind of move that can keep them in the line of sight for american conservatives. they are a conservative movement think tank. i think it is a smart move. this is a lot of speculation about how he is going to lead. the truth of the matter is, you never know how a leader is going to lead. january 1, 2009, exactly four years ago, he came from syracuse university. a was a professor of business and government. i heard that aei had checked out of the, world of ideas. some boring guy come up with a phd from syracuse. months later, i read that his aie -- aei was being led by a right-wing maniac.

it is the same guy. you do not know how anybody is going to lead. i am friends with jim demint already. i look forward to cultivating that. i think really good times are on the horizon for those guys. >> will miss his voice in the senate, but there has been a long, strong relationship between heritage and the republican study committee. a strong relationship will continue with him at the helm. and we will miss him. >> heritage is a tremendous organization. as steve said, the rsc when heritage have been linked for years. that is where hamas -- where ed got his start. senator demint, we will miss him in the senate. there has been nothing better in standing up for the principles we care about.

he is an honorable, and wonderful guy. i was hoping he would run for president several months but. >> turns out he did. >> i am going to tell him arthurs says he is going to write a check to ahead -- to aei now. >> the gentleman in the back. >> recently, you talked about providing a vision for the future, for conservatives. there was a paper that took a brave position. we come to find out that he has been fired. you think that was a wise decision for a party that needs to be reaching out to voters? when can we expect more balanced? >> i take it you are talking about copyright in particular, but there were other white papers. in general, when you look at where we are going to go, it is going to be the members of of

thought rsc have to unite and fight for the principles we believe in, to get conservative, winds. we are going to be swimming upstream in a number of fronts, with a lot coming at us, and we know that. we are looking forward to that challenge. but the only way to be successful is if the members -- and the staff plays a critical role of giving us the tools we need to go to battle. at the end of the day, it is only when the membership, a strong membership, maybe 170, hit we can unite together as members of congress to shape that vision in a conservative way, will be successful. my main focus is going to be uniting our members that know what our taxes, -- what our task is. we are going to do it with a great staff, led by paul teller and a number of others.

>> over here. we have a microphone coming to you. >> a was really struck by your focus on families and by the principles. one principle i have not yet heard is the idea that washington politicians cannot solve these problems alone, and that conservatives should think about strategies for in powering states -- empowering states to help conservative solve these problems. we have talked about a house rule that would recognize the 10th amendment authority of states, which might be the only way to force congress to propose something like cut, he up, and violence. what are discussions you are having -- cut, cap, and balance. what discussions are you having?

>> i have already spoken to my predecessor, bobby jindal, and the head of the republican governors association. in the next two years, i want to be working closely with the governors. the majority are republican governors. just like we propose conservative solutions in the house, those governors have great integration ideas about how to successfully tackle problems they have already done. obviously, and we have seen a number of things bobby has done in louisiana to reform our states. we can invoke as great ideas, working hand in hand, not only through hearings at the legislative level, but sharing the successes that governors have had a go a different way from the obama big government approach. those governors have to balance their budgets. they are doing in while taking care of the needs of their

states, and in many cases far exceeding and outpacing and economic growth, much better jobs. lower unemployment numbers in many of those states, where they are led by republican governors, who are approaching the challenges of .> let's go back right here >> i am from politico. i wanted to ask -- recently there has been a lot of talk about top conservatives coming to assignments and saying there are too conservative -- i wonder if you have any comments on that. >> i think it is wrong. it is unfortunate and is not healthy. i think it is wrong. i think it is largely because of

these guys, they voted against some of the big issues that -- they voted against the debt ceiling. i think it is unfortunate. hopefully there is a way to help fix it. but when you think about -- his camp from kansas represents 70% of the state. the member from that district has been on the ag committee since there has been one, since kansas has been a state -- it has been a long time. you get kicked off that committee -- by the way, he has a ph.d. in ag policy. it makes no sense to me. hopefully it will not happen again. hopefully there is a way to remedy it. >> i also think it is very unfortunate that members were removed from their committees.

one of the things a steering committee member -- i fought to put more members on key committees. beyond that, i have talked for years, not just through this campaign for chairman. it was a point of mine to get more rsc members on the steering committee. that is something i have talked about for a number of years. talking about that's positively as part of the campaign -- i want to formulate a larger members -- a block of members on the steering committee. >> right over here, in the corner. >> from "the national journal." you make it clear you do not think tax cuts are the solution -- tax increases are the solution to this problem. you want spending cuts. is there a definitive compromise

if democrats agree to substantial spending cuts -- is there room to compromise on the top rates? >> no. you have to step back -- what is going to help our economy? everybody knows washington has a spending problem, a big one. trillion dollar debt as its the last four years -- adding to our fifth year. we have heard a thousand times, a promise -- this is politicians making the promise, not your parents, not your priest, is politicians. we will use the money to reduce the debt -- it never happens. it is a joke to go down this road. i know we are in a tough situation because of the decisions made in the past -- january 1, taxes go up. that is because we made that decision in the past, and here we are. but that does not mean you change and go against the things you know work and will solve the

problem. of corsicana -- of course you cannot. it will not create jobs. you cannot trust them, particularly the guys in congress. you just cannot go there. >> have to look historically. we have done this. we have never found a time in modern history where raising taxes led to a balanced budget. it never happened. we found a number of areas where controlling spending -- the president likes to talk about, he and bill clinton had this great affinity and a love talking about the clinton tax increases as if that balanced the budget. it did not balance the budget. it was not until later that the people who voted for the tax increase cut the feed, the republican congress comes in and control spending and we get to a balanced budget with economic growth. look of the 1960's, the 1980's, the 2003 tax cuts we are

debating now -- the federal government took in tremendous increases in revenue. want to get new revenue? under those tax cuts, in three years the federal treasury took in 40% more money by cutting taxes. this myth that you need to raise taxes to get more revenue i would argue history proves that tax cuts? revenuestually generate the through economic growth. should we appease the president's pound of flesh she wants to get out of class warfare he played during the campaign? >> you say the tax increase -- a tax rate increase are more a statement of philosophical principle than economic principal? >> it goes to his class warfare message more than anything. history does not back up that it is good policy. he himself in a 2009 is bad for

economics -- if you increase taxes in a bad economy it will make the economy worse. we're still in a bad economy. >> i am in the unfortunate position of calling the last question here today -- the last question here in the front table. >> i'm a conservative voter. would speaker bay near be able to pass a compromise on the tax rate -- speaker john boehner be able to pass a compromise in the tax rate without the rac? >> i do not know. [laughter] look, if it has a tax increase i am not going to be for it. there are lots of members who will not be for it. but you do not know -- the rsc, as i certainly discovered -- i knew it going in, but the see it firsthand.

we will see. but we said it several different ways -- if there is a tax increase it will not be approved. >> i would not support a plan that raised taxes. i am focused on working on a solution to this problem. it is a serious problem. the president surely has not put out a serious proposal. we passed solutions to this problem in the house, many with bipartisan votes. the only thing the president has talked about so far has been very partisan, yet he campaigned on the promise he would work in a bipartisan way. we are calling on the president to work in a bipartisan way -- there is a good place to start with the ideas we have out there that would not only be proven to work but would focus on economic growth rather than growing the size of government. >> that brings us to the end of our time. i want to say, thank you to jim, good luck to steve, and god bless you both for your service

to our country. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012] >> the house oversight committee investigates the use of human growth hormone in the national football league. live from capitol hill starting at 10:00 a.m. eastern on c-span 3. wednesday, chairman ben bernanke told a news conference. an update on the federal open market committee meeting. coverage starts to clock 3:00 p.m. eastern also on c-span 2 3. -- c-span3. >> from the u.s. chamber of commerce, a look at the fiscal challenges facing the nation, including negotiations over the so-called fiscal cliff. former comptroller general and former congressional budget office director explain why they think raising taxes will not solve all the problems. this is just over an hour.

>> i will make a fewtoday we are going to talk about three issues briefly. one is that fiscal cliff, to is the debt ceiling. three is the so-called big deal that has to be done on our debt and deficit. unfortunately those issues, convoluted, especially in this town. they are distinct. the impact each other but they are distinct. this fiscal cliff is an artificial state. congress came in, said this law expires on this date. they extended it wants. they put in the sequestration. it is a date. all they have to do is extend the date and allow themselves time to discuss the issues. instead they are putting it all into a lame duck session. that is a problem.

sometimes it leads to bad policy. the fiscal cliff can have real consequences. cbo has said that it would cause a recession if we were to go off the fiscal cliff. i do not dispute that i do point out that in 1993 when these taxes were first put in, many said they will cause a recession. they did not. the economy is improving on its own right now. and getting some much stronger. the impact of the fiscal cliff, while not something to be encouraged, may not be as bad as many have thought. and certainly is not worth making bad policy that will have much longer-range implications. the debt ceiling. the second issue. another kind of artificial date.

it has been in law for decades. congress periodically has a partisan debate over whether to extend it. an interesting debate since there really is no option. you either extend it or you default. the fault should not be an option. it is something that should be avoided at all costs. but we put this critical date in there so we can have the debate, have a vote and then extend the debt ceiling as we know we have to. finally we have the issue of the debt and deficit in the long run. the issues of real importance. we do not account for our expenditures the way businesses do, the way individuals have to. we get to account for them and ignore many of the long-term implications. if we were to put them in, it

would increase the amount of the debt we owe and have promised, dramatically. also on the big deal -- we know there has to be taxes, revenues, and expenditures. the all have to be on the table. we cannot do it with anyone of them. we need to have a comprehensive approach that includes all of these. doing that takes time. what we do in the short run on the fiscal cliff may impact our ability to achieve the greater goal and get some real fundamental improvement in our debt and deficit situation. tax increases that occur now will probably not be debated again in the context of comprehensive tax reform. it will make it harder to do

that and to achieve that. as we go to these three problems, we have to recognize that it is a very short one problem with the artificial deadline. something we have debated many times in the past and probably should be fundamentally changed. if we are going to raise the debt ceiling to talk about it, we should do it prospectively at the death the but the process. but we have not had but it for quite a while. finally, the big issue is how much can we spend and how much do we have to tax going forward over the next two decades to keep our fiscal accounts in balance and move them in the right direction so we do not become greece? it is interesting that we talked about the fiscal coordination have in the countries and to last come along and bail them out when they have not done what they're supposed to do?

i do not know that we are that much different. we have a great panel. people thought are far smarter than i am. i will introduce them now. and then i will sit down and i did ask some questions to revival at the panel to keep their answers relatively short so we can run through a lot of questions and get out of here on time. we have ailson frasier, director of the institute for economic studies at the heritage foundation. as director, she oversees the heritage foundation research on a wide range of domestic, economic issues, including federal spending, taxes, the debt and deficit. before joining heritage in 2003, she was deputy director of the oklahoma office of state

finance where she worked for governor. next, rudy penner, the institute fellow and the rj and francis miller chair in public policy at the urban institute. prior to that in his long career, he was director of the congressional budget office where he supervised a young economist who did not learn a whole lot from them and that is what i am here rudy has had a distinguished career he has had. i remember those conversations. i hope i can do them justice. finally, we have david walker, founder and ceo of the comeback america initiative. he is formally the comptroller general of the united states. he was also the head director of the u.s. government accountability office for almost 10 years. he is widely read and has written numerous articles on the debt and deficit.

he has a new initiative which makes tremendous sense. his new group is looking at the efficiencies, inefficiencies, duplications in the government to try to find areas where we can save money without cutting. it is a very interesting initiative, one that you ought to look into and see about supporting.

i hope we he will mention it briefly in his comments today. i will turn to the panel and sit-down and we will start discussing hopefully some of these issues. [inaudible] >> the short run problems of the fiscal cliff, but we're going to do with this debt and deficit issue and take time to summarize how we should look at these issues. i will start with david on the far side and move right across. >> thank you for coming. first, there are common denominators between the challenges at the federal, state, and local levels. some are inadequate but the controls, escalating health care costs, huge unfunded and

off balance sheet obligations and outdated tax systems. other factors -- demographics, and infrastructure, state of the infrastructure, etc. with regard to the federal government, there is a lot of attention on the so-called fiscal cliff. i think here everyone knows what that relates to. that is really more the system. it is not the disease. but washington typically does, it focuses on some things rather than the disease. we need to avoid the fiscal cliff. we need to recognize reality. there is only so much that can be done the balance of this year. we need to do a credible down payment and build a bridge to a grand bargain which would involve more fundamental reforms that have to be achieved. but it controls. we had but the controls until 2002. we had been out of control ever

since. we have had democratic spending policies of republican tax policies which leads to large and growing deficits and escalating debt. we are going to have to reform the social insurance programs. we have to reduce defense programs and other spending and the gate in a comprehensive tax reform. that takes time. it will have to of all -- involve extraordinary presidential leadership, which we have not had in a while. hopefully we will get that. it will involve some type of citizen engagement. the good news is i recently took a 27 state national fiscal responsibility bus tour round the country focusing on swing states. a representative group of

voters did the following after they heard the burning platform case about where we are -- 97% believe putting our finances in order to be a top priority. 92 percent agreed on six fundamental principles and values be exposed to them for guiding a grand bargain. 85% agreed it would take a combination of spending reductions and additional revenues. and least 77 percent agreed on a range of fundamental reforms to but the controls, social and service programs, health care, defense, taxes, business and political reforms that are needed to put us on a more prudent sustainable path. people are disgusted with a lack of progress. they want results, not rhetoric. i am in town for private meetings on the hill and the

white house. hopefully sanity will prevail and build a bridge to something that is transformative. in the final analysis, we are all in the same vote and share in the commonalities. we need to work together to solve his problems to create a better teacher. >> i have no idea what is going to happen with the fiscal cliff. i have an uneasy feeling that president obama and speaker boehner do not know either. it is a huge possible fiscal shock. it would be one of the biggest negative fiscal shocks we have had since world war ii. the only thing that is comparable is when we had in vietnam surtax applied after military spending was already falling.

falling office cliff would mean a recession. i think it could be much worse than cbo implies. 1, the economy is very fragile right now and vulnerable to a shock. secondly, i think it has a horrible psychological impact on the business community and consumers who would totally lose confidence in our government's ability to govern. i agree with david that what we need right now is a downpayment, making some progress. one that probably involves the tax and spending side. and the pledge to do much more later. the important thing to know about the proposals on the street right now is that you can accept everything in the president's proposal for

everything in speaker boehner's proposal and he would not solve the budget problems in the longer run. in my judgment, you need about twice what they have put on the table. i'm very troubled by the fact that we are giving the impression that we can solve this problem without imposing much pain on the middle-class. the president made that very explicit. he promised never to raise taxes on the middle class. of course the republicans would back him up on that. there is no way mathematically you can solve this problem without giving something. that has to involve the middle- class. that is where all the money is. as for the point about building a bridge to the bigger solution, i think we have to. i am not clear how we do that.

how do we pressure the congress to returning to the issue and avoid the cliff right away? that is very hard, i think. we have had these mega triggers of this sequestered. we thought surely the super committee would avoid this totally irrational thing. because they would avoid it and come up with something more reasonable, but of course they did not. that is what has left us where we are today. it did trigger did not work, what would work? i've become pessimistic that we can think of any action forcing mechanism. >> thank you. alison? >> thank you. i am delighted to be here.

i want to talk about some basic things. the discussion we're having today is not about that this booklet at all. the fiscal cliff is more than -- is not about the fiscal cliff at all. this fiscal cliff is about other things. there are a number of things that need be addressed. this discussion really is not about the fiscal cliff, per cent. congress and the president can come together quickly and pass a bill that would put off the fiscal cliff, he there for some large amount of time or even indefinitely. it really is about making a down payment on closing deficits in the future. i would say it is also really about the president's campaign not this -- not just this past election but his first election

to hike taxes on the successful. we have to see some real leadership on the longer-term budget unsustainable issues. what we do not need is negotiating in the political theater. when we see that stop, that we know we will be serious about whether we will resolve the fiscal cliff and have some large down payment. when it comes to republicans and conservatives, there are three things to bearer in mind. one is the house republicans they were elected to cut spending and not raise taxes. that is one of the reasons it is hard to move toward. there are a number of revenues that would be acceptable to conservatives.

the first one is one that speaker boehner put out almost immediately after the election. that is revenues to a stronger economy. that seems to be acceptable. also acceptable would be a way to reduce subsidies. you could see more premiums for things like flood insurance, pension plans and so forth. these are acceptable type of revenues to conservatives that are not getting a lot of discussions. also are forms of privatizing. we talked about public-private partnerships in transportation, and for structure. also all kinds of ways we can undertake a program of privatizing, involving asset sales and other services to

generate revenues to the federal government that would be absolutely acceptable to conservatives. we could go open up access to energy sources. the new revenues must not be used for more spending and used to reduce the deficit. how we would lock that in my past experiments have been rather a failure, i do not have the solution to. it is important to note there are revenues that are acceptable to conservatives. that leads me to the other point. our long-term issue really is the spending issue. to the extent we have tax revenues low today, not because of the rates, because the

economy is underperforming. the economy is quite weak right now. we should see much stronger growth and unemployment much lower. we want to see policies put in place that strengthen the economy and also begin to tackle this longer term spending issue we have driven primarily through entitlements. when it comes to those, there are a number of very broad, bipartisan support of the recommendations easily available to the president and speaker boehner and other leaders want to come together and get serious about making a down payment on our fiscal future. that leads me to the fourth issue -- it is possible to solve this without raising taxes. i know this because at the heritage foundation, we have done this as part of the product by the petersen foundation. we put together our long-term plan. i have it right here. shameless promotion, i know.

it is a choice. maybe a political one, but not economic. even warren buffett, who is been a champion of raising taxes on the wealthy to make sure they pay their fair share, would not raise revenues over 18.5% of gdp. so we need to think about is it necessary, if you get more revenues, how do you ensure they do not go to more spending? what are we talking about taxes right now women have a spending problem? that is what i would like to offer at. >> thank you, very much. it is interesting that when you look at the exigency getting something done, it really is artificial. we have a date that congress put out there.

that is what we have to act by. if we do not, we go off a cliff. i'm not suggesting by any stretch that we ought to do that. i am suggesting there is hyperbole on both sides to say we have to act now. they see this as a gate that should not be wasted. a crisis that should not be wasted. i am afraid that in rushing to judgment over an artificial date that the policies get the short shift. i am not suggesting we should go off the cliff. i do not think that is good policy. but these artificial dates have never produced good results. in order to create something that was so draconian it would never happen, we have to deal with it. back in the depths of the financial crisis, we put in a

program that some people said would cost $700 billion. the banks have paid back, and they have done so with a profit. aig is now going to unwind its federal relationship to the tune of a profit to the federal government. many people were very skeptical that would ever occur. putting out these artificial dates, i think sometimes we give this policy a short -- people alluded to the fact we have to have a bridge to the future. that is a recognition we are probably not going to get a big deal in the very near future. we know the pieces, but the negotiation might take longer. is there something out there we are missing that we should or

could do to ensure that whatever we decide to do does not go to waste and does not get lost in the shuffle down the road? is there something we are missing that we should do that we could do to hold people's feet to the fire? >> we ought to talk about what might be realistic. given the clock is ticking. you have to look at what is set to expire. i would suggest the payroll tax cuts should be allowed to expire. it is $127 billion. it is not needed. in addition to that, it sets a terrible precedent to general revenue financing of social security. secondly, you clearly do not want all of the sequester to take place.

allow some of it to take place. we have got to patch amt. we have got to do something pending more fundamental health care reforms. the president talks a lot about balance. i would suggest that is the wrong term. we need a comprehensive solution, not a balanced solution. balanced implies 50/50. it should be weighted towards spending. tax expenditures, they are back door spending. if you reduce tax expenditures, even geared toward the "wealthy," then you reduce spending and increase revenues.

95% of people who voluntarily sign up for voluntary programs for medicare get a 75% taxpayer subsidy irrespective of their income. if you move towards premium support, that will generate more revenues, but it will count as a spending reduction under government rules because premiums bought from medicare beneficiaries count as reduction in spending. if you look at indexing formula as that end up affecting both the spending and revenue size, dealing with inflation or otherwise, you can do things that are structural that can slow spending as well as generate additional revenues. we need to do a lot more than that. what we also need to do is recognize reality. our goal should not be

balancing the budget. we will not do that anytime soon. the states do not do it either. it is not a balanced budget. they are using cash flow. what we need to focus on like a laser is debt to gdp. i think realistically, what ever you do not let expire, you extend to the end of september, along with the debt ceiling limit, so you have all things coming together at once with a more realistic mechanism, because the nuclear device did not work, the super committee was a super failure committee, and therefore we have to recognize those kinds of devices will not work. you have got to have something that is more pragmatic. >> i think the discussion over the fiscal cliff has gotten

more pessimistic almost every day. we really cannot go over it. there is one thing that gives me a little hope. it seems to me there are three things we almost absolutely have to fix. one david mentioned, the alternative minimum tax. right now, we have to fix it retroactively for 2012. if we do not do that, there will be over 25 million americans who will get a real shock when they do their tax returns. they may not be able to do it early. i am told they are not prepared. they have to reprogram their computers, they have got to do all sorts of other things. the other thing is that i cannot and imagine we will allow doctors under medicare to experience the 27% cuts in their reimbursements.

there will not be 50 doctors serving the medicare program. thirdly, i really think we have to fix the estate tax, which goes back to the million-dollar exemption. i would strongly recommend that if we do not fix it, you do not die in 2013. [laughter] i said that at an earlier meeting and a congressman responded, but you should commit suicide in 2012. [laughter] so, i have the hope that if we could really concentrate on fixing these things, then we could cover more areas on the revenue and spending side. david is right.

we do have these things that should encourage us to do something. the debt limit. i would add to that, he did not mention the continuing revolution. we know it expires march 1. we have a coming together of these things that should provide a very strong incentive to get something done in the longer run. >> i would echo just about everything you guys have said. i think the fiscal cliff is this false deadline. this is a crisis that is entirely created by congress and the president. you pick the right four things. the amt, unemployment, extended benefits, and i think there is a little more wiggle room on

that one, but it is an issue, and the state tax. these things are critical. they have to be done. they will have to make some sort of decision as to what to do on the sequester and tax policy. my recommendation would be they simply extend all current policy with regard to those two. they are running out of time. the president is going off to hawaii shortly. it is not the time to go through complex policy issues because you will give them the short shrift. they should accept them. when the cr expires, that gives them the more hard deadlines when issues need to be addressed. these are strongly agreed to by

partisan issues, raise the retirement age for medicare. take care of reducing subsidies and medicare by testing premiums, at a premium for part a. then there is further means testing that could be done in social security through a progressive indexing and things like that. those are the things that have been talked about around town. you could do a bill very quickly. does it need to be done in december? not if you extend all current policy. the important thing is that this makes a substantial down payment for long-term sustainability. to focus on 10 years, while important, it gets to those cash flow issues, it does not necessarily deliver the kinds of reforms that will be reducing our debt to gdp ratio and stabilizing it.

i to not know why we are not hearing serious conversation about this from the guys negotiating. some of these things were included in the president's own budget. they were smaller than i would have liked. simple things to do. easy to do in a bill. >> part of the problem is if you only extend the four things mentioned, there is no down payment. >> right. you are not going to extend the tax policies. that will not happen. >> no down payment now. what i am saying is you have to do some of these other things. >> i would love to see that. >> let me tell you my concern. i do a lot of talking inside and outside the beltway.

i am concerned liberals have misread the election and are overreaching. there is no question the president campaigned on more revenues and more share for the wealthy. it is legitimate. to say he has more than that is not credible. what we are hearing right now is grand bargain-type numbers on revenues but not with regard to reforms in spending. they are talking past each other. the president said, we want to reach marginal. the fact is you generate more revenues, you increase the effective tax rate of the wealthy more than going back to old tax policy.

it is more politically acceptable for republicans to go that route. it is more in line with comprehensive tax reform, which is where we need to go. i am concerned they need to get real and focus on avoiding the cliff. they need to set targets for the grand bargain and focus on debt to gdp. >> i agree. i think allison is too optimistic. [laughter] i think david is right, the other side has become much stronger against any kinds of reforms to entitlement. both of us have been in meetings recently. groups have really come up very strongly about, do not touch my social security, medicare, medicaid, and so forth.

what we have to do, one thing that bothers me about all of this, if you really project where we are going to a sovereign debt crisis, which seems to be inevitable if we do not change these policies, the people who are really going to be hurt are the poor. 25% unemployment in greece and spain. imagine what the minority unemployment would be if we had a 25% unemployment rate on average in the united states. we see pensions being cut without any notice hardly at all. social programs slashed. there is at least some probability that will happen to us.

i will say it is a certainty eventually if we do not do something about the situation. i would think they would be much more sober in their demand. at this moment, i do not see it. >> i would say a lot of this is, if we are talking inside the beltway, that is a different conversation. part of the disservice is the debate is having today is it is steering away from what the real issues are, the most depressing issue, i am more optimistic. it is steering the conversation away from that. it is not helping ordinary americans understand what the threat is over a somewhat longer term. i do not think we have 25 years anymore. maybe it is two or five. we get closer and closer every year that we build up our debt and every year that we postpone

tackling entitlements. >> we had a political -- someone who ran the congressional budget office, somebody who has worked in the state budgets, people who can count, which is always a disadvantage in discussing federal finance, and yet, we come up with a consensus of things we all know we need to do. i am being a little bit provocative here, but i am worried about the fiscal finance in this country because

i think we are getting a real break because europe is having the problems they are having and, as a result, the world has excess savings and are doing the investment and do not have a great choice. they look at us and say, we are better. when we get downgraded, our interest rates fell. we are living on borrowed time. why they are playing political games when there is such a real issue. we are self-dealing in our own debt. purges in over 70% of all new u.s. debt issuances. if you look at people who are

buying our debt, their appetite is getting less, not greater. they are buying short-term debt because of huge interest rates risks. if you look at china in particular, they are looking for corporate bonds rather than u.s. treasury securities because they do not like what they see. we are living on borrowed time. we have created another bubble. my view is the reason the fed is doing that is because the mandate was changed in the late 70's to where they have to be concerned with unemployment. we need a fiscal deal. the fed has to change its policy because both are imprudent and unsustainable over time.

>> right. >> one of the most successful physical consolidations in the developed, democratic world in canada, in the mid 1990's, and i ask the canadian politicians how did you do it? the public went from cheering on spending to deficits within a matter of a year or two. the government in canada now risks some peril if they do not balance their budget. the answer you most frequently get is all they had to do was say, 40% of revenues was going to pay the interest bill on the canadian debt, and the public immediately realized that was not a great idea. we cannot make that argument. we run these massive deficits

and because interest rates have gone down, the interest bill has barely moved at all. it will not take much to change that. even with the modest projections in terms of the interest rate increases they see over time, we are going to quadruple our interest bill in 10 years. hopefully, that will get attention. i almost regret the fact markets have not reacted more negatively to what we are doing than they have. >> if you are looking at $16 trillion debt in total, and interest rates at rock-bottom levels, if they go up 2.5%, you are looking at $500 billion a year in interest costs, which,

the total deficit is $1 trillion. you are looking at increasing that by 50% if interest rates go back anywhere near their averages. you are right. do the math. again, i was asked in a panel, somebody said if i could change anything out there on the tax reform, what would it be? i said, the understanding of the american people. the average american does not understand the tax code and they do not understand what it is or is not doing. the headline was that i called the american public stupid. i did not. they are not, this set of all of what is in the tax code. they are equally not cognizant of what is in the budget issue. they think you can balance the budget by cutting. i have seen a lot of educational initiatives go on, but they do not necessarily seem

to have any legs. how do we get the american public to understand the debate we had here today? it was a lot more agreement than debate. >> alison and i participated in a fiscal wake up tour. a fiscal solutions tour. now we are doing the next generation of that. we did in september and october of this year. what you have to do is build a burning platform. you have to understand the kinds of polls most politicians listen to our superficial and grossly misleading. when the public is asked, do you want to work longer for social security? do you want to pay higher premiums for medicare? do you want to pay more taxes? what do you expect them to say? my point is, when you build a burning platform case, which can be done in 10 minutes, and

i have done it thousands of times, they get it. that is when you get 97% off to be the top priority, 92% agree on the principles, 85% weighted towards the spending, so what does that mean? the biggest deficit this country has is a leadership deficit. we do not have leadership from our top political leaders. the president needs to use the power of the pulpit to be able to build that case. we need to take a book out of bill clinton's presidency in 1998 where he used this type of approach to be able to prepare the way for social security, and for this case, grand bargain. that is what needs to happen. let me give you three simple ideas for congress. no budget, no pay. i am serious. this is one of our mantra. if you do not pass a budget by

the beginning of the fiscal year, you do not get paid until you do, and there is no retroactive pay and. california did it. had a behavioral impact. no deal, no break. starting in 2013, they do not any recesses until they get a grand bargain. these people get seven times more days off than the typical american. if they got paid for performance, they would owe us money. thirdly, every member of congress should be required to prepare their own taxes. everyone should be required to prepare their own taxes because if they had to do it, they would wake up and we would get tax reform lot quicker. i ask people who prepare their taxes, less than 5%. as the governor knows, a lot of

people, i do not get deductions but for two things. interest's on a home mortgage and charitable contributions. nothing for state, local taxes. gone. g-o-n-e. people need to recognize where we are and change incentives. >> a lot of people have made this effort. on the other hand, when you see the kind of information the general public has, one almost has to weep. one way we totally confuse people these days is with

something called the baseline. the definition is in the law. they have to assume all of these tax cuts expire. that is so ridiculous, most of us use other kinds of baselines. we use a current policy baseline, which extends all of these tax laws. more recently, everybody seems to be able to choose their own base line. [laughter] the president has his own. bowles-simpson, as much as i admire what they did, they had a rather odd baseline, too, which assumed we did not continue tax cuts for the rich. no wonder the public is totally

baffled by all of this. if you look at the british austerity program, they do not compare it to what would happen if you continued. it is quite a bit less generous in that. whereas we, when we talk about reforming social security, talk about cuts and benefits, when all we are doing is slowing the growth. if you look at the bowles- simpson proposal, the benefits for everybody continues to increase over time, not as much as for the lower income.

we are so confused, it is surprising they have the vaguest notion of what is going on. >> you see this reflected if you just look at simple polls. it is confusing. you hear tax cuts. we are not talking about tax cuts. we are talking about preventing tax increases. they hear all of this fighting. if you go out and engage in the public outside of washington, you have to get people who are working to take time out of their busy schedule. that is hard to do. these are really complex issues. you cannot boil them around to your little sound bite. you have political leaders who are afraid to tackle major

problems that involve benefits that will at some point affect everybody in this room and everybody in the country. that is hard for them to do and it is easy to demagogue it. the one thing we should take out of it is the public is pretty disgusted at the way washington is broken down into total disrepair. the fact that you are not having a serious conversation on the part of the leadership, all three parts, about the fiscal cliff is a major part of the problem. we just had an election. we cannot stop campaigning. we have got this deadline. the debt is not artificial. no wonder the public tunes out. >> the right word you used is disgusted.

compare and contrast the comments with the research he conducted we will have a brief discussion for a little while. i will pose a few questions and we can open it up to the floor for a broader conversation. let me know who is here with us. to my right, martin, the chief staff to governor bob mcdonnell. at the end, roxanne white joining us from colorado.

so, their full bios are in the pamphlet on your table. >> first, thank you for the report. it provides a good framework to continue to look at the challenges facing us. we have been engaged in pension reform in colorado. our pension fund is about 69% in solvent. we did major reform and now we are in court trying to defend that reform. our pension costs will go to 22%. to give you a sense of how far behind the war, if we lose in court and the battle is whether or not we have a right, we could see a need to go to 25% of compensation by 2020.

it is important to get through the litigation. we are very concerned about medicaid costs. they are about 20% of our budget, growing at a rate of 8% per year. we are very engaged in putting everyone in medicaid in an affordable care collaborative. we believe the exchange offers the opportunity for two things. it was largely supported by small businesses in colorado to help them to be able to afford insurance for their employees. there was a very bipartisan effort to move forward. we are looking at cost containment there and how we get everyone into a managed-care

type situation. we have 17% of our population that drives 67% of our medicaid costs. it is almost exclusively our aging population. it's a small number of people driving our costs. the final thing we are doing in terms of local government is our department of local affairs is working on consolidation, trying to get our fire departments to consolidate at the local level. not forcing to do that, but prior to becoming governor, the mayor was able to consolidate in the region, our fire departments and pieces of our police departments and pieces of our road improvement.

really saying to our local municipalities one of the first executive orders we did was a no unfunded mandate. we are doing our part of not trying to pass on additional costs. you have to do your part of really trying to control costs. we think our municipalities are in serious trouble. the last thing we had been doing is we have had a 22.7% increase in personal income. we believe a great deal of that is one-time money. we have been working with our legislature. we have gone from 0% to 8% reserves in all our budget. 5% on restricted reserve and really working with our legislature with what we see as one time money being only spent on one time costs.

we are engaged in that fight on a daily basis of trying to create a better sense of how we fund things. not just spend everything but having the state have reserves. that is where we are at in colorado. >> why is that money one time money? where is it coming from? >> capital gains. looking at things like water quality improvement, deferred maintenance, local municipality, but we really do not think it is sustainable revenue yet. >> when the governor took office, we did not have the shortfall that some states do. we did not have the best budget picture. her promise was to create the best business environment possible, create more and better jobs, and to make government smaller, smarter, and more efficient.

we did things like that, agency consolidation, it consolidation, some of those common sense approaches that you would do more often that we do not see. those are things that are saving us millions of dollars. our it consolidations are estimated to save $100 million over the course of the term and potentially next term. we also, in the same situation, have $2 in our rainy day fund. it is really thinking about how we do things smarter, more efficiently, and using the technology and resources we have to make things more efficient and cost-effective for government. we reduced by $5 billion by passing a law that says we could not pass what was not

funded. ours was not challenged in court, fortunately. we are looking at more pension reform. we have seven pension systems in the state. they are operated by different pension boards that have different rules, different structures, looking at the potential of having them under one board that monitors all of the pensions so you have across the board unanimously. one of the things we have done in the state of oklahoma is our transportation secretary, we took down a 9000-foot bridge in oklahoma city.

over 1900 steel beams were repurposed and recycled for local counties to get rid of structurally deficient bridges. we will go from the bottom to the top in terms of creating that infrastructure. we are literally recycling and saving millions of dollars by something that would have just been thrown out. it is the only project like that of its kind in the country. we are proud of it.

the other thing we are doing is roxanne's governor, tom mentioned before the third bucket of energy. an initiative was created to convert. the governor is supportive. we went to detroit with a group of 13 governors signed. we want to convert and produce as a state vehicle and give us that ability to do that efficiently and we will give you the market. we will put up 5000 cars we commit to buying and we will save our state dollars by the fuel efficiency, but we also have the added bonus of creating jobs in our state as well as energy independence. it does not make a whole lot of sense to buy energy from countries that are not stable. we could be energy independent

by 2020. the innovation is coming from our business owners in this state and across the country. the more we can do to use that, the better off we will be for it. oklahoma has been second in job growth since the governor has been in office. we are one of the lowest states of unemployment. we have had the fourth highest in capital income. we feel like the things we have been doing in office are producing the results. the fiscal cliff will have devastating effects on that. it was unsustainable for us to carry on the costs without

facing major cuts in education and transportation and public safety. the aerospace and defense industry and our state are looking at 16,000 jobs if we go off the cliff and sequestration occurs. we do have some good things that are happening. some other things that are potentially not so good. >> one quick follow-up. what did detroit say? >> absolutely. we put it out there. i am not the expert. we have a half-ton truck out

there now. we are looking at a three- quarters truck. we are looking for more vehicles that are under production. we actually already are purchasing some of those. our entire department of transportation will be over the course of the next year. >> thank you. thank you again for the opportunity to be here to speak. what we are doing in virginia, we are doing a lot of those things in virginia, as well. we had the fortune of an incoming governor inheriting a by annual budget from the outgoing governor. when the governor came into office in 2010, we inherited a budget shortfall of about $6 billion. the very first thing we did the moment after he was inaugurated is we came into office, we rolled up our sleeves, and figured out how we would fill that hole without raising taxes.

the outgoing governor had proposed approximately $2 million in personal income tax increases. our mandate from the governor, working with the finance secretary, was to find ways to cut costs, and to do it without raising taxes. we did that. i am proud to say the governor, through his leadership, not only did we erase the deficit, but we wound up with a $400 million surplus in july of 2010. we have had surpluses for each of the years after that. we had one in 2011 and again this year in 2012. they average anywhere from $550 million to the lowest was in 2010, $450 million is the average over that time.

one of the biggest things we did is came in, and health care costs are escalating. the governor put forth policies he believes encourage and incentivize state government to not operate as usual. a couple of examples. we came and the governor put in something controversial in 2010, particularly with some of his friends in the legislature, a bonus plan. what we said is state employees, you figure out how we saved money at year end, break the cycle, figure out how to save that money, and we will return up to 3% of that to you as a bonus. we saved three times the cost of the bonus.

it was a success. in 2011, somewhat different. the governor told state agencies you find ways to save money and returned it to us and we will return a small percent of that to you. we were very successful in doing that. significant in hundreds of millions of dollars more returned that year in savings. this past year, the governor redid the bonus plan. it cost about $7 million and we returned again well over twice that cost in savings to the state. the governor has really ramped up. there has been controversy. ramped up the use of public -- to outsource some of the functions in state government that have quintessentially known

the been known to be functions. we have saved hundreds of millions of dollars in doing so. we are returning the money to the bottom line. much like he talked about, we came into office, the rainy day fund, including what the governor will announce next week in his next budget announcement, we will be well over $700 million in the rainy day fund. the effort there is to try to bring down those tuition costs they have talked about. we have put about $250 million prior to the governor's announcement. there will be additional funds

into higher education. the effort is to bring down those tuition costs. they have been escalating in virginia like in every other state. we are honored to have a great higher education system but the schools are becoming unaffordable for residents. once again, the public-private solution was in place. but the governor told college presidents -- ok, the state will put in additional money, but you have to cut costs every allocate up to a percentage of what you are getting back into students and schools. it was about 7.3%. they were very concerned with pope was gone on in d.c. we will be disproportionately impacted in virginia by what will inevitably have to occur and that is cut. we are connected to d.c. we have a huge defense sector in virginia. we know that.

there are estimates out there of a jobless -- job loss of over 150,000 jobs potentially as a result the sequestration. we are putting into place measures to address that. last year, the but -- the governor created a federal action contingency trust fund. we are putting money away into a fund where the governor haskell -- broad discretion. the fund is intended to address cuts in areas so we can put funds into particular sectors in northern virginia to offset those costs to incentivize the private-sector to come back in and create those jobs. we are trying to work with a lot of private sector solutions in virginia to address the challenges. we are ready for the challenge and we will do our part with the

balanced budget. we must balance our budget. we have tried to be very conservative in our revenue estimates. with the uncertainty in d.c., it is really difficult. we have already talked to the leadership and general assembly. we may have to make significant changes. one of the last things we did prior to completing the budget was the governor had me send out a request to all agency heads saying submit plans for a 4% reduction. we're holding some of that in advance, knowing that we may need that come january or february.

>> dick, are these representative states? >> one of the great things about this country is i do not think any state is the same as every other state. i think these states are smaller states. rural states. states in which public employee unions have less leverage than the politics which makes a big difference. i think where the infrastructure needs arno werner as great as -- are nowhere near as great as they are in the states that have several cities which require massive public transportation mechanisms, but the fact that though those analyses are not there does not diminish in anyway the steps these states have taken to keep their fiscal house in order. having rainy day funds is critical to take care of the enormous situations that occur in budgets and the economy. i think he cannot lose sight of

the fact that one of the reasons you have a smaller medicaid expenditure is because of the federal formula which favors some states because it is not a based on the actual need. it is based on a median income calculation. as a result of that, a state like new york are california, has a lot more poor people and a lot of rich people so it does back at the same break. i think you get 60% reimbursement from the fed. you get 50% -- oh, it's you who gets 60%. in new york, we only get 50%. it makes a big difference.

someone ended up saying it is all of james madison's fault. there are couple of things that are terribly important that cannot contradict anything that you all said. we do not have a good way of measuring the adequacy of our emperor structure. we know that the chinese spend eight times as high you're a percentage of their gdp emperor structure as we do in this country. that makes us less competitive. i think i learned from the people in the chamber here that the cost of moving goods in the united states is greater in off to the dollars that it is in europe or asia.

therefore adding to our lack of competitiveness. i do not know personally how you grow a real economy without being able to produce goods in a competitive way. i think that it is important to also understand that there are so many factors that go into the adequacy of an educational system. you referred to consolidation. absolutely critical. new york state, there are 650 school districts. a lot of them, each of them has one school bus or several how one school bus and the commissioner of transportation. >> oklahoma, we have five to 21 school districts. as tiny as we are. -- 521 school districts. as tiny as we are.

>> it is hard to change that but there is an enormous redundancy in extent -- in expenditures. that has to be addressed. also, the nature of the population varies. that has an impact on the quality of education. the ability of schools to teach. we have to recognize that 50 years ago, we had -- there were not many opportunities for women or women-running states. the greatest opportunity professionally women had were teaching. now they are out doing [unintelligible] -- us males in many cases.

but there is not a national solution to that. last of all, let me say that one of the reasons that states are in trouble is because they have borrowed against the feature to pay for the present. when i was in albany, i watched one major financial institution after another, and say we will solve your budget problems for you. we will discount your future revenues. if we can borrow against the future, then we do not have to tax.

i would respectfully submit to you that there are tens of billions of dollars around this country that -- where future revenues have been hypothecated to solve today's budget problems. that could be stopped. it could be stopped statutorially. last of all, somebody raised the question about what happens -- should the federal government do anything? i did all the negotiations on behalf of new york in 1975 with president ford, bill simon, degette federal help.

-- to get federal help. it was a good thing that ford waited as long as he did to step in. when he finally stepped in, he was able to do something that made a difference without imposing any financial risk on the federal government whatsoever. he was able because he waited until the last possible moment to impose discipline on the state in consideration without providing something that wasn't even cast. they took back a lean on every dollar the federal government transferred to states and local governments. the facts never came about. i'm not advocating the federal government extend credit or write a check.

i am saying that there are ways in which the federal government can politically in a sensible way put discipline on the process. if they wished to. every politician in new york, the unions, the tanks, everybody did what they swore they would not do. so whether the discipline comes from laws or the ability of somebody else to take something away if you do not behave in a responsible and prudent fashion, these problems and dollars we are talking about is sufficient consequence to require careful examination of ways to keep this society together.

>> let me interrupt you right there so we can get a chance to bring everybody in. i wanted -- want to thank everyone for their remarks. in the opening remarks, i want to throw a few questions to you. in particular, given the, about the match and how it varies. would you describe on the health care fund is innovative. the problems on the federal level for finding ways to deliver health care.

one of those approaches that is talked about a 10th of the affordable care act is the authority to experiment with episodic payment spiritous a to a physician you do not get paid more by doing more. you'll get paid for treating the patients in a way that patient needs to be treated. you are doing that. in colorado, despite the fact you have it fairly generous f map. tell us where that came, and how that is going. >> just because we have a more generous f map does not mean costs are not a primary issue for us. they are very much. it has allowed us to move forward with some expansion and exchange. but it does not mean we can ignore the cost containment issues or the fraud issues. we are also working

aggressively but the federal government on return visits and when the hospital releases and how we take away dollars it people leave the hospital and have to return. really looking at the whole arena of patient care. the other thing we did 18 months ago was we went to all medicare patients having a copayment on every visit. it is not a significant copayment but we have significantly changed our medicaid emergency room visits by the use of co-payments and a higher co-payments. it is not that significant but for income, it is significant. it is a mere $5 and we have reimbursed our over use of emergency room visits by simply charging $5. we have a neighbor -- we have been able to drive change. it does not take that big of a carrot or stick to change behavior.

really going to a place of, just like everybody pays a portion for their health care, so to medicaid. try to jack behavior and also driving behavior on the positions side. -- trying to change behavior and also driving behavio on the physician side. cox in oklahoma, the head traditionally and unemployment lower -- they traditionally had lower unemployment. some states have standard a collaborates that are much higher. -- equilibrium rates that are

much higher. things from that perspective are fairly good in both states. the unemployment rate has fallen in all three states. particularly in oklahoma and virginia. as more people go back to work, people are hang taxes -- are paying taxes. \ there is a political temptation to recognize the changes and capitalize on them but sometimes it is just good luck. to what extent do you attribute the successes on the state level to policies that have been put in place versus the natural business cycle? >> one of the biggest dissections is certainty -- distinctions is certainty. the fear of businesses have with the federal system.

businesses are not willing to expand and invest and do that because they do not know what the situation will be with the federal system and the economy. the difference in oklahoma is that when people locate -- then know the path we are on. they know the governor's plan is to continue to review red tape and regulations on businesses. we have a quarter point tax cut the first year he was in office. we will advocate for continued lower taxes in all -- in oklahoma. we were not successful last year but our mission is to be successful. so businesses know the environment they are creating will be one that will be conducive to their expansion. i think that is why we have had success. but on it -- on a national level we may not see. >> as far as virginia, there are

some factors which make it unique. obviously proximity on the east coast. the fact we have a lot of major interstates that run through virginia certainly benefit us. in going to her point, a lot of it is a certainty. we are also the northernmost right to work state on the east coast. that is a tremendous benefit to us as far as attracting businesses. in addition, hampton roads, we have the largest deep water port on the east coast. we are planning to take full advantage of the panama canal and the changes coming there soon to bring commerce into virginia. we are aggressively building our rail system, going from the port of virginia west to get that traffic out west. we just announced that we are building and other highway, a tall access highway. one of the primary purposes is to bring truck trafficking from the port of the virginia inland a connected directly with i-95.

that will help us bring newcomers in. i want to mention something that has been a little tabooed as of late. the governor is not ashamed of it at all. we have taken full in of it. that is incentives to business. the governor has put significant additional resources into our virginia economic development partnership. funds he has at his deposal -- disposal but also resources to build up infrastructure we need to do in virginia. the was a piece in the new york times recently that criticized the use of that. in virginia, some of the things that were pointed out as concerns, the fact that they neglected to invest in higher education, we are doing that in britain. -- in virginia. states are not keeping an eye as to where these resources are going. we are aggressively pursuing call back on any funds we get to the private-sector.

we are looking to build a power structure in virginia. we are definitely a fortunate to be where we all are in the east coast, to have right to work laws, our proximity with the port. it is a combination of certainty, a little bit of good luck, maybe, proximity, but an aggressive governor. i have to give our generally assembled -- general assembly credit. it is a combination of all this. >> one last question the ribble open it up to the floor. i am a tax guide but on the federal level primarily. your comments earlier we think about tax reform, the mantra is bought and the base.

there is a lot of interest that was key to the simpson bowles and a lot of other proposals. those can have other consequences. they are mixed. you talked about the debt -- the deduction. in my view, it is a subsidy. but it is a policy at benefit to states, particularly those with high income tax rates. the mortgage interest deduction is one of our largest expenditures. as the federal government were to broaden their tax base, so too with the state. there would have a benefit. let me ask two questions on the task force.

-- on the tax front. dick, you alluded to both of them. one is the amazon issue. big effort on behalf of the state to advocate the federal legislation to facilitate the collection. are those issues here states are advocating for or working on behalf of? do you see that as a large revenue opportunity for you? on the federal tax reform thought, to what extent you see opportunities are risks from base broadening? >> i think your point is correct. there are some tax expenditures which eliminated, states will benefit from as well. i think each of these stand on their own hook, so to speak.

you have a whole series. if you look at a chart of what states follow the federal tax code and in what respect. a lot of them follow some parts of this law and not all of them. some the for on state taxes. -- some differ on state taxes. i feel that spending money, whether it is a tax expenditure for an appropriation, to get somebody to go from one jurisdiction to another, given the problems the united states of america faces today, is not a useful expenditure and unlimited public resources. i know that flies in the face of a lot of states who wish to bring in jobs. but if you bring jobs in by offering all kinds of tax abatements and exemptions, as

new jersey did recently, -- it is a zero sub game. they are -- there are no ways to commit the obligations? years ago, the was a silly program in the carter years were states used to buy the business to move from one state to another. >> just have a chance to comment. i want to bring it that everyone else to request our small businesses have asked for equity with the amazons of the world. we have been doing some of that. we have been very clear with our taxpayers.

it would not ask for tax increases and lease -- until we did to the degette personnel reform and after 11 times of our voters turning down the ability to take our personnel rules out of the constitution. we said that was the first thing that had happened to the second thing we have been able to do is lean all aspects of government and required our department -- they cannot ask for any money that had been cut before from consolidations and could not replace any leading efforts. bolkiah said to our taxpayers is -- what we have said to our taxpayers is we have not clean

our own house yet so we would not be asking for additional revenue -- what we have said to our taxpayers is we have not clean our own house yet so we would not be asking for additional revenue. estimates of .5%. that would be significant for us. we are keeping a very watchful eye. my governor. we were here last week meetings the speaker and president and harry reid. what they do will have significant impact on our state. the state's offer a lot of good ideas and things that the guys in d.c need to listen to. they lose sight of the impact of all those things will have on the state. a lot of the things that will not have a lot of advocates for listening.

been more than likely will be on the chopping block. rex a lot of the things roxanne and denise said are true in virginia as well. we will likely continue to be a traditional state. just the governor -- we addressed the governor. we just got a large infusion of new jobs from amazon very and began to collect the salesmen use taxes. allow the states are waiting to see what happens there. we have positioned ourselves to deal with that. one thing i did not point out is -- we have -- we came into office with a significant challenges to our pension

system. the governor has done a couple things. we reform our pension system. we have gone from a defined benefit plan to a hybrid plan, effective 2014. for new employees carried with it we have eliminated or minimize the legal challenges we know will probably come. secondly the governor, with some of these savings, put hundreds of millions of dollars back into our pension system. they are a serious problem. we will have to continue to watch that closely. we will wait to see where the chips fall. we will be prepared for things like the fact fund, extra reserves to try to have as much liquidity as possible.

>> i would like to open it up to the floor. there may be other topics that have not come up here. there is a microphone here. >> please adjust state your name and make it -- the question brief. we are a little short on time. >> i am sam gilbert, and member of the chambers employee benefits committee. one of our last meeting, we have a representative from indicate. medicaid costs will significantly increase. the question i have is it seems that with, municipal financing has seen its brighter days.

what are the efforts of alternative, public-private? -- investment partnerships? >> let me take two questions together. this woman's right here. >> i am a representative for nonprofit america. what are the partnerships you are having with the department of labor, the epa, with regards to helping small businesses. >> by the partnerships, federal partnerships and partnerships with nonprofits in the states.

>> it's a very appealing concept with the truth of the matter is that if you want to build something and it will cause it -- x dollars, you want to service the many pay for it. -- the money you borrow to pay ofor it. particularly if the revenue you are going to use to pay the debt service. it will come out of general tax revenues. it will not come from any other place. the fact you have private enterprise and the infrastructure bonds is perfectly sound for projects that are optional, in my view.

but it is not a solution for an essential mass transit subway system or bus system. i remember when i ran the mpa in new your, people would ask me all the time wise open 24 hours did it -- a day. that answer is so all the people who clean your homes and offices can get to and from their. -- their own residences. you cannot run most of these public facilities on the basis a purely economic soundness. if you were governor or mayor, you would want to borrow the money as inexpensively as you can. if he were using general revenue dollars for that service or charging people and there are tuition or feed, you would want those as low as possible.

>> anyone want to take issue for that? we are aggressively using them in virginia. >> our laws are ppt laws. put on the books a little over a decade ago. we used a ppta to bild a new interstate 460 in virginia which will get traffic. in its primary design, it also could be used for vehicles trey to get a chance for vehicles, goods and services quickly to other access points to a the be taken out by rail or go on the

interstate system, we are using it in the education arena. it is being used in the virginia to build schools. it is being used for a lot of different purposes in virginia. we find we cannot do it alone. there are issues that come along with that. for example, some of the ptda's. -- ppta. they will continue to be responsible for maintenance on that long after it is complete. maintenance costs alone in transportation has skyrocketed. the cost of petroleum, in the last years, it is increased by 350%. >> there are costs that you can

contract with the private sector. it takes that issue off the books and allowed to put those funds in other places. >> but i know there was another question. we are well over our time. with that, we will conclude this panel. we will move straight into the next session terry i would like to thank the protest against further time. -- to thank all the participants for their time. >> today, darden larsen talks about ongoing negotiations of the fiscal cliff. then we hear from steven of the associated press on how congressional leaders plan to handle social security as part of the fiscal cliff talks. later, more on the role of

social security with christina martin of aarp and david john of the heritage foundation. washington journal in life every day at 7:00 a.m. eastern on c- span. -- is live every day at 7:00 a.m. eastern on c-span. >> the white house was very controversial. designed, who washington city, there was competition and he submitted the design for a palace. americans were not having a palace. it was not particularly awe inspiring. in 1821, a european diplomat told congress it was nearly -- neither large nor awe inspiring but the answer he gave said the building served its purpose. if it were larger and more elegant, perhaps some president would be inclined to become its permanent resident. >> vicky goldberg has gathered a

few of whitehouse photos. watch sunday evening at 7:30 on c-span3's >> from the u.s. chamber of commerce, and look at the fiscal challenges facing the nation. including negotiations over the so-called fiscal cliff. former comptroller general david walker and former congressional budget office director rudy penner explained why they think raising taxes will not solve all the problems. this is just over an hour. >> i will make a few introductory remarks. today we are going to talk about three issues briefly. one is that fiscal cliff, to is the debt ceiling. three is the so-called big deal that has to be done on our debt and deficit. unfortunately those issues, convoluted, especially in this town. they are distinct.

the impact each other but they are distinct. this fiscal cliff is an artificial state. congress came in, said this law expires on this date. they extended it wants. they put in the sequestration. it is a date. all they have to do is extend the date and allow themselves time to discuss the issues. instead they are putting it all into a lame duck session. that is a problem. sometimes it leads to bad policy. the fiscal cliff can have real consequences. cbo has said that it would cause a recession if we were to go off the fiscal cliff. i do not dispute that i do point out that in 1993 when these taxes were first put in, many said they will cause a

recession. they did not. the economy is improving on its own right now. and getting some much stronger. the impact of the fiscal cliff, while not something to be encouraged, may not be as bad as many have thought. and certainly is not worth making bad policy that will have much longer-range implications. the debt ceiling. the second issue. another kind of artificial date. it has been in law for decades. congress periodically has a partisan debate over whether to extend it. an interesting debate since there really is no option. you either extend it or you default. the fault should not be an option. it is something that should be avoided at all costs. but we put this critical data

bank -- date in there so we can have the debate, have a vote and then extend the debt ceiling as we know we have to. finally we have the issue of the debt and deficit in the long run. the issues of real importance. we do not account for our expenditures the way businesses do, the way individuals have to. we get to account for them and ignore many of the long-term implications. if we were to put them in, it would increase the amount of the debt we owe and have promised, dramatically. also on the big deal -- we know there has to be taxes, revenues, and expenditures. the all have to be on the table. we cannot do it with anyone of them. we need to have a comprehensive

approach that includes all of these. doing that takes time. what we do in the short run on the fiscal cliff may impact our ability to achieve the greater goal and get some real fundamental improvement in our debt and deficit situation. tax increases that occur now will probably not be debated again in the context of comprehensive tax reform. it will make it harder to do that and to achieve that. as we go to these three problems, we have to recognize that it is a very short one problem with the artificial deadline. something we have debated many times in the past and probably should be fundamentally changed. if we are going to raise the debt ceiling to talk about it, we should do it prospectively at the death the but the process. but we have not had but it for quite a while.

finally, the big issue is how much can we spend and how much do we have to tax going forward over the next two decades to keep our fiscal accounts in balance and move them in the right direction so we do not become greece? it is interesting that we talked about the fiscal coordination have in the countries and to last come along and bail them out when they have not done what they're supposed to do? i do not know that we are that much different. we have a great panel. people thought are far smarter than i am. i will introduce them now. and then i will sit down and i did ask some questions to revival at the panel to keep their answers relatively short their answers relatively short so we can run through a lot of